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ITC crosses Rs4 trillion in market cap, shares rise 9%

LiveMint 03-07-2017Ravindra N. Sonavane

Mumbai: Cigarette maker ITC Ltd has become the fourth Indian company to cross market capitalization of Rs4 trillion as investors continued to buy the stock after the government notified that cigarettes will be exempted of additional excise duty under the goods and services tax (GST) regime.

The stock hit a record high of Rs353.20 apiece and gained as much as 9.06% in intraday trade. At 9.30am, it was trading at Rs345.60 on the BSE, up 6.7 from its previous close, while its market cap was Rs4.20 trillion. So far this year, it has gained 34%.

Earlier, Tata Consultancy Services Ltd, Reliance Industries Ltd (RIL) and HDFC Bank Ltd have achieved this milestone. Currently, TCS is the India’s most valued company with market capitalization of Rs4.64 trillion, followed by RIL and HDFC Bank at Rs4.47 trillion and Rs4.25 trillion, respectively.

According to the notification issued by the central excise department, basic excise duty and additional excise duty are repealed and only national calamity duty is continuing under the GST regime for cigarettes.

According to Macquarie Research, net realisation for ITC’s portfolio can increase by 7% (with the same pricing) with tax savings of Rs0.25 per stick in the GST regime.

“The tax savings in the GST regime is mainly on account of removal of multi-layer tax regime. Earlier VAT was levied on excise duty, while GST now will not be applicable on Cess. We also highlight that specific tax share in GST regime is higher compared to

VAT, which gives companies like ITC a competitive advantage,” said Macquarie Research, in a note to its investors.

The broking firm said the stock remains its top pick in the consumer sector and it maintained “outperform” and increased its target price to Rs385 a share.

According to a Deutsche Bank report, the return of predictability in taxation could drive volume growth and opportunity to launch a lower-priced cigarette to drive growth in the organized industry. The brokerage firm has maintained a “buy” rating for the stock and increased its target price to Rs390 a share.

Of the analysts covering the stock, 38 have a “buy” rating, two have a “hold” rating, while one has a “sell” rating, shows Bloomberg data.